LONDON–(BUSINESS WIRE)–AM Best has revised the outlook to stable from negative
for the Long-Term Issuer Credit Rating (Long-Term ICR) and affirmed the
Financial Strength Rating (FSR) of C++ (Marginal) and the Long-Term ICR
of “b+” of Nomad Insurance Company JSC (Nomad Insurance), the wholly
owned subsidiary of Nomad Insurance Group Limited, a private
non-operating company (both entities are domiciled in Kazakhstan). The
outlook of the FSR remains stable.
The ratings reflect Nomad Insurance’s balance sheet strength, which AM
Best categorises as adequate, as well as its adequate operating
performance, limited business profile and weak enterprise risk
management.
The revision of the Long-Term ICR outlook to stable from negative
reflects AM Best’s expectation that Nomad Insurance’s risk-adjusted
capitalisation will remain at a strong level, as measured by Best’s
Capital Adequacy Ratio (BCAR), supported by positive operating results.
The company’s risk-adjusted capitalisation deteriorated in 2016 and 2017
due to an increase in net underwriting leverage and significant dividend
payments. AM Best had anticipated a further decline in 2018. Instead,
BCAR scores improved to a strong level supported by an increase in
retained earnings. An offsetting factor for balance sheet strength is
the company’s elevated investment risk profile, due to the high
financial system risk in Kazakhstan.
Nomad Insurance has a track record of positive, albeit volatile,
operating performance, with a five-year average return on equity of
20.6% (2014–2018). Over this period, performance benefited from a
relatively low level of loss activity and Kazakhstan’s high interest
rate environment. The company’s technical results are pressured somewhat
by high acquisition and management costs, but profits have been reported
in four out of the past five years. AM Best does not expect the expense
strain to ease in the near term due to Nomad Insurance’s high-cost
distribution network and lack of scale. Prospective performance may be
subject to volatility due to the challenging market conditions in
Kazakhstan.
Nomad Insurance has an established business profile in Kazakhstan. Based
on regulatory returns as of Jan. 1, 2019, Nomad Insurance ranked fourth
out of 20 active non-life market participants in Kazakhstan, with gross
written premium of KZT 18.3 billion, translating into an 8% market
share. In 2018, the company lost its leading position in local motor
third-party liability insurance and now ranks second within the segment.
Going forward, the company aims to focus on profitability, rather than
growing market share.
This press release relates to Credit Ratings that have been published
on AM Best’s website. For all rating information relating to the release
and pertinent disclosures, including details of the office responsible
for issuing each of the individual ratings referenced in this release,
please see AM Best’s Recent
Rating Activity web page. For additional information
regarding the use and limitations of Credit Rating opinions, please view Understanding
Best’s Credit Ratings. For information on the proper media
use of Best’s Credit Ratings and AM Best press releases, please view Guide
for Media – Proper Use of Best’s Credit Ratings and AM Best Rating
Action Press Releases.
AM Best is a global rating agency and information provider with a
unique focus on the insurance industry. Visit www.ambest.com
for more information.
Copyright © 2019 by A.M. Best Rating Services, Inc. and/or its
affiliates. ALL RIGHTS RESERVED.
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Contacts
Laura Balkarova
Associate Financial Analyst
+44
20 7397 0315
[email protected]
Catherine Thomas
Senior Director, Analytics
+44
20 7397 6264
[email protected]
Christopher Sharkey
Manager, Public Relations
+1
908 439 2200, ext. 5159
[email protected]
Jim Peavy
Director, Public Relations
+1 908
439 2200, ext. 5644
[email protected]
